WCT Holdings Bhd
(Oct 21, RM2.08)
Maintain “hold” with unchanged target price (TP) of RM2.30: WCT has proposed to acquire four pieces of adjacent freehold land in Serendah, Selangor with a cumulative size of 221 acres (89.4ha) for RM115 million cash from Matad Sdn Bhd.
The acquisition will be funded via internally-generated funds and is expected to be completed within three months.
It is subject to approval of the Economic Planning Unit of the Prime Minister’s Department but does not need shareholders’ approval.
We are positive on this acquisition as the land is adjacent to WCT’s existing 462 acres of land in Serendah. Since the land is located next to the North-South Expressway (NSE), it will enhance the visibility and accessibility of its development.
The location is strategic as it is easily accessible via the new Sungai Buaya interchange of the NSE, 35 minutes from the city centre and 15 minutes from the Serendah KTM station that is three stations away from the Sungai Buloh station to connect to the Klang Valley Mass Rapid Transit.
The acquisition value is fair at RM12 per sq ft (psf) as compared with asking prices of nearby freehold land of RM10 to RM25 psf. WCT is planning a mixed commercial development on the land but it is still at preliminary stage.
Based on the gross development value (GDV) per acre of its existing land, the estimated additional GDV from this new acquisition will be RM566 million. The GDV could be higher since the initial plan was to build a township. The land bank enhancement will support WCT’s property earnings in the long run.
Our earnings forecasts are unchanged for now. Maintain “hold” at an unchanged sum-of-parts-based TP of RM2.30. — Maybank IB, Oct 21
This article first appeared in The Edge Financial Daily, on October 23, 2014.